Quick Facts

Morocco’s economic freedom score is 60.1, making its economy the 89th freest in the 2015 Index. Its score is 1.8 points better than last year, with a very large improvement in trade freedom and smaller gains in freedom from corruption, labor freedom, and monetary freedom outweighing declines in business freedom and the management of government spending. Morocco is ranked 9th out of 15 countries in the Middle East/North Africa region, and its overall score is just below the world average.

Committed to economic reform, Morocco remained largely immune from significant Arab Spring protests. Over the past five years, gains in five of the 10 economic freedoms, including labor freedom, monetary freedom, and investment freedom, have offset declines in the management of public spending and business freedom. Morocco has regained “moderately free” status in the 2015 Index.

Proximity to Europe and a free trade agreement with the United States have helped to establish a foundation for dynamic economic growth. Openness to global trade and investment has facilitated the development of a modern and competitive financial sector. Relatively prudent fiscal policy has encouraged macroeconomic stability and greater structural reform.

Background

Morocco, a constitutional monarchy with an elected parliament, has been a key ally in the struggle against Islamist extremism. Constitutional amendments proposed by a commission authorized by King Mohammed VI and approved by referendum in 2011 are designed to increase the power and independence of the prime minister and provide greater civil liberties. In November 2011, the Justice and Development Party became the first Islamist party to lead the government, but the king retains significant power as chief executive. Reforms were adopted in 2014 to reduce government subsidies. In addition to a large tourism industry and a growing manufacturing sector, a nascent aeronautics industry is attracting new foreign direct investment. Agriculture accounts for about 15 percent of GDP and employs almost 45 percent of the labor force.

Widespread corruption undermines investor sentiment and raises the cost of operating a business. Recent cases have involved the embezzlement of millions by public servants. In addition to his public role, the king is the majority stakeholder in a vast array of private and public-sector firms. The courts are inadequate and cannot be relied upon to rule quickly or fairly.

Morocco’s top individual income tax rate is 38 percent, and its corporate tax rate is a flat 30 percent. Other taxes include a value-added tax and a gift tax. Overall tax revenue equals 23.7 percent of gross domestic product. Public expenditures equal 36.1 percent of domestic production, and public debt corresponds to 62 percent of the size of the domestic economy.

Incorporating a business takes five procedures and less than a week, with no minimum capital required, but completing licensing requirements still takes about three months on average. Labor market rigidity continues to discourage dynamic job growth. In January 2014, the government ended costly gasoline and fuel oil subsidies, but it maintained some food subsidies.

The average tariff rate is 3.4 percent. Tariffs have fallen, but regulatory issues may delay trade. Foreign investors cannot buy agricultural land, and investment in some economic sectors is regulated. The financial system has undergone modernization and expansion. Morocco’s banking sector is one of the most liberalized in North Africa. The stock market does not restrict foreign participation.